The US Dollar-Euro Exchange Rate and US-EMU Bond Yield Differentials: A Causality Analysis

Sosvilla-Rivero, Simon; Ramos-Herrera, María del Carmen

doi:10.2139/ssrn.1810504

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The US Dollar-Euro Exchange Rate and US-EMU Bond Yield Differentials: A Causality Analysis

15 Pages Posted: 21 Apr 2011

See all articles by Simon Sosvilla-Rivero

Simon Sosvilla-Rivero

UCM Institute for Economic Analysis

María del Carmen Ramos-Herrera

Universidad Complutense de Madrid (UCM)

Date Written: April 15, 2011

Abstract

This paper test for causality between the US Dollar-Euro exchange rate and US-EMU bond yield differentials. To that end, we apply Hsiao (1981)’s sequential procedure to daily data covering the 1999-2011 period. Our results suggest the existence of statistically significant Granger causality running one-way from bond yield differentials to the exchange rate, but not the other way around.

Keywords: Causality, Exchange rate, Long-term interest rates, Rolling regression

JEL Classification: C32, F31, F33, G15

Suggested Citation: Suggested Citation

Sosvilla-Rivero, Simon and Ramos-Herrera, María del Carmen, The US Dollar-Euro Exchange Rate and US-EMU Bond Yield Differentials: A Causality Analysis (April 15, 2011). Available at SSRN: https://ssrn.com/abstract=1810504 or http://dx.doi.org/10.2139/ssrn.1810504